Investing in a property abroad with the equity of your home

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Equity... the money in the bricks of your house... you can do many other things with it. For example, you could invest it in a second home. Not just for your own use, but to rent out! Renting out a second home can ensure that you make a nice efficiency.

What is equity?

If your home is worth more than the mortgage on your home, there is an equity. You can withdraw this equity. The money will then be made available, for example, to reinvest in real estate or to renovate your current home. You can do what you want with this money, there are no rules attached. However, it is important to look at what is most profitable. Many people want to build up their retirement or rental income by investing in investment properties. Withdrawing equity from your home can be a very interesting strategy for this.

For example, if your house is worth € 400,000 and you still have to repay € 220,000 to your bank, you are talking about an equity of € 180,000. What many people do not know is that with, for example, a ton of equity, you can purchase not one but several investment properties. You can build a complete portfolio, without losing extra time to the management or the process itself. You can scale up relatively easily and make a passive income a reality.

The equity of a home is often used for a remodel, a larger purchase or to supplement income. In doing so, the money is spent with a specific purpose. However, many home owners choose to use their equity to to create a passive income; they invest the money in something that will generate a efficiency. Such an investment could be buying a second home, not to live in but to rent out.

Investing your equity

Buying a second home as an investment can be interesting. However, financing it is not always easy. If the equity does not fully cover the cost of your new home, you will need a loan. You can apply for this at the bank or the municipality. Equity gives a bank a confident feeling. This means that you can take out a loan with your own capital to finance major purchases.

If the equity fully covers the cost of your new home, you do not have to deal with additional conditions and the higher mortgage interest rate of a rental mortgage. You can rent out the second home and charge a nice rental fee for it, then a nice efficiency is possible!

The costs of a second home

It is important to realize that rental income not only consists of profit. Owning and renting out a home involves various costs (and efforts). These include the interest on any loan, rental maintenance and associated costs, costs for the HOA (Home Owners Association), taxes, insurance, property management and mediation costs for finding tenants.

Furthermore, it is important to know that renting out is not without any obligation. After living in the house for a certain period of time, tenants usually have the right to use rent protection: you cannot simply terminate the rent after that. Not even if you have the desire to sell the property, regardless of the reason for that sale. Also, not all properties abroad are legally allowed to be rented out, so this is very important to know before buying.

Control your finances

It may not be your first thought, but investing allows you to have more control over your finances. You build up stable assets, without being dependent of a crisis or employer. You are in control of the accumulated capital; you could even reinvest the profits.

Once you start investing, you can grow exponentially. You can build up your pension, so you are not dependent on the government. Moreover, you create lasting financial freedom. In this way, the money is working for you. This is especially interesting when negative savings rates are introduced and you have to pay to "store money".

You will have to step over the threshold first, there are obviously risks involved, but by doing business with the right professionals you reduce these risks to the level where they are worth the choice. The benefits in the long run will only increase.

Whether you are looking for a home to enjoy yourself, or you are looking for a home abroad to rent out. ConnectHouses will help you find the best property that fits your needs and budget.

We will use our large network to bring options to the table that cannot even be found online!

Do you have a search question? Contact us here.

And also our financing experts are always ready to answer all your questions, if you have a question you can ask through our Mortgages & Financing page.

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